In the past, it was enough to have good mechanical skills, some common sense and a dose of good luck to be successful in the auto repair business. However, a lot has changed. The increase in extended warranties, environmental demands, government regulations, more competition, less qualified help and rapid changes in technology, all have contributed to challenging profits.
Management Success has helped thousands of shops. We have defined a common pattern which is directly tied to the owner’s business skill and knowledge. Often, the growth and success of the business are related to the owner’s background and experience.
In smaller shops, or those that have been in business for longer than 5 years have an average gross profit of $25,000 in sales per month, the owners tend to be technically trained and spend the majority of their time, fixing cars.
Other shop owners have pushed their monthly sales up into the $25,000 to $45,000 range. In those shops, the owner tends to be the service writer and oversees the rest of the business. Their technicians fix most of the cars. In a small percentage of their shops, the owner hires a service writer, while continuing to work on cars himself. Sometimes, a spouse or family member may contribute to serving customers.
The common barrier here is their businesses grew to a certain level of monthly sales and then the business flattened instead of expanding.
Key Factors that Often Prevent Growth in Smaller Shops
1.) Finding good help.
2.) Low car counts or lack of marketing.
3.) The owner is over-worked.
4.) Profits are too low.
5.) The shop is not organized and lack of policies.
As the owner, you will try everything possible to overcome those barriers. Some shops have been in business for 30 years and are still struggling with these issues.
1.) Close the shop.
2.) Sell the shop or turn it over to a family member.
3.) Continue to operate as normal and hope things will get better.
If you are an owner that thinks this way, you have already decided there is no solution. There is a group of shops that average between $50,000 and $90,000 in monthly sales. They will occasionally help the service writer or help in the back, but normally they are not working in the operation on a day to day basis. These shops have run into barriers too.
Common Barriers in Mid-Sized to Large Operations
1.) Quality of employees and employee retention.
2.) Communication of shop policies and procedures.
Here you have owners who can run the shop successfully, but the struggle is in handing over responsibilities & delegating workflow.
There is another group of owners who have pushed their operations beyond $90,000 in sales per month. They can come and go as they please. Most don’t open their shops in the morning. They have a service writer or manager who runs the day to day operation.
Here, the owner has successfully turned over the job of managing or running the shop to someone else.
They will tell you that they are doing fine and have no real problems. When you talk about taking the shop to the next level, they begin to tell you they are not really interested in doing that. Eventually, they will start to tell you about the barriers that they have run into and why they have decided not to expand.
Expanded to Fail
Some owners in this group have taken their business to the next level then something happened to pull them back down. Sometimes it is due to losing ‘good help.’ Other times, it’s due to an issue in trust or a dramatic drop in business that discouraged them to move forward.
Finally, there are shop owners who have one shop and start opening multiple locations. They too eventually run into problems. They expand to the level just beyond the ability that their organization and their people can effectively control.
There is the shop owner that successfully manages five locations, but when he opens the 6th store, everything starts to break down. In most large multiple location operations, there seem to be certain constant points where problems occur. Generally, they fall into 2 to 5 locations, 6 to 10, 11 to 15, 16 to 20, etc.
They are not involved with the operation, they’re doing something else. They hire a general manager to run the operation and, as they grow bigger, they hire district managers to run 4 to 6 stores.
In this growth pattern, profits boom. It is a wild time. They consistently open stores and hire teams. But, eventually, this business model can also fail. The owner feels frustrated because communication is lost, and organization spirals out of control.
If he inspects each operation, he might find things are happening when he has a strict policy enforced against it. They are not doing it ‘his way’ and he can’t seem to be able to implement the changes he wants. He has all kinds of training programs, some of which help while others don’t. The operation starts to flounder. It is amazing to him that he is unable to fix it.
The Real Problem
There are three things that you need to run a successful multi-location operation. Having a system and getting it implemented is one of the missing basics. Another is implementing organizational structure and the last is knowing how to find and train the right people to do the job.
The trick is having a successful model in one shop, then being able to duplicate that model in sequential shops. Most owners expand too quickly and take their operation beyond their ability to control it.
The Real Solution
At every one of those levels, there are common barriers that must be handled to expand. The owner’s inability to handle that problem is solely based on his lack of knowledge of how to handle that problem. The more you grow, the more management knowledge and skills you need. That’s the key.
At Management Success, we have helped shop owners overcome these barriers every single day. Do you want to stop feeling frustrated? Are you ready to get out of your shop and get into your business?
To see which stage your shop is in, click here and take this quiz.